What did the Tribunal hold?

The Tribunal found that the Assessing Officer and CIT(A) failed to consider the assessee's disclosed commission income and made incorrect assumptions about sales of mobile phones and closing stock valuation.

The assessee, a channel partner for Tata Teleservices, declared a net loss for AY 2015-16. The Assessing Officer estimated income at 2% of gross receipts, and the CIT(A) restricted it to 1%.

What were the issues?

Whether the estimation of profit by the AO and CIT(A) was justified, considering the assessee's disclosed income and business model.

Hanuman Mangal Telecom vs CIT(A) | ITAT Mumbai 2023

Income Tax Appellate Tribunal, SMC BENCH, MUMBAI

Per contra, the Ld. Departmental Representative relied upon the 7. order passed by the Assessing Officer and the CIT(A). He submitted

that the Appellant had failed to furnish relevant documents/details during the assessment proceedings and therefore, the Assessing Officer was constrained to estimate income at 2% of gross receipts. Further, the order of CIT(A) restricting profits to 1% of gross receipts was just/reasonable, and therefore, did not call for any interference.

In rejoinder, the Ld. Authorised Representative for the Appellant 8. submitted that the Assessing Officer did not ask for details/information in addition to what was furnished during the assessment proceedings. He reiterated that the loss declared by the Appellant was actual loss and that the Appellant would be able to substantiate the same in case granted an opportunity.

We have considered the rival submission and perused the material 9. on record. We note that the Assessing Officer has estimated profits without taking into consideration the details/documents furnished by the Appellant during the assessment proceedings. We also find that the CIT(A) has moved on incorrect presumption that the Appellant is also engaged in the sale of the entry level mobile phones. Further, the CIT(A) has also failed to appreciate that the Appellant earns commission income on sale of prepaid electronic vouchers, paper recharge vouchers, new SIM card etc. which has been disclosed in the Profit & Loss Account. Accordingly, there is no infirmity in the figure of purchases, sales and closing stock has disclosed in the Profit & Loss Account.

In view of the above, we set aside the order passed by the CIT(A). 10. Accepting the contention raised on behalf of the Appellant, we remand the issue raised in the present appeal back to the file of the Assessing Officer for fresh adjudication keeping in view observations made by us in paragraph 9 above. Accordingly, Ground No. 1 and 2 raised by the Appellant are allowed for statistical purposes.

In result, the present appeal preferred by the Appellant is allowed for 11. statistical purposes.

Order pronounced on 25.04.2023.

HANUMAN MANGAL TELECOM,MUMBAI vs. COMMISSIONER OF INCOME TAX (APPEALS), DELHI

What did the Tribunal hold?

What were the facts?

What were the issues?

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